Stocks in London were mixed during midday trade on Friday, with the FTSE underperforming its European equivalents, in anticipation of critical data on US jobs.
The FTSE 100 index was down 36.14 points, 0.4%, at 8,246.38. The FTSE 250 was up 53.28 points, 0.3%, at 20,793.34, and the AIM All-Share was up 2.11 points, 0.3%, at 735.95.
The Cboe UK 100 was down 0.4% at 825.03, the Cboe UK 250 was up 0.5% at 18,265.71, and the Cboe Small Companies was little changed at 16,710.60.
In European equities on Friday, the CAC 40 in Paris was up 0.5%, while the DAX 40 in Frankfurt was up 0.2%.
‘All eyes are on US jobs numbers later today as the data could provide an important clue as to the Federal Reserve’s next steps with interest rates,’ said Russ Mould, investment director at AJ Bell.
‘The consensus forecast is for 140,000 jobs to have been added during September, roughly in line with the previous month. If that proves correct, it will signal to the Fed that the labour market isn’t in the danger zone and another half percentage point rate cut at the next meeting might not be needed. However, the Fed would still be keeping a close eye on the jobs market in that situation because the loss of momentum might be a precursor to weaker data next time round.’
Goldman Sachs predicts an above consensus rise of 165,000 in nonfarm payrolls.
‘Big data indicators generally indicate a solid pace of job growth, and seasonal distortions likely weighed on the last two payrolls readings,’ the bank said.
Goldman also thinks August’s figure could be revised higher.
‘While payrolls revisions so far this year have been disproportionately negative, we suspect August growth will be revised higher, as has been typical over the last decade. August payroll growth has been revised up by 67,000 on average since 2010, about two thirds of which occurred in the first revision,’ the broker explained.
Ahead of the US data, stocks in New York were called higher. The Dow Jones Industrial Average is expected to open 0.1% higher, the S&P 500 index is called 0.3% higher, and the Nasdaq Composite is seen climbing 0.4%.
Meanwhile, the pound rallied after the Bank of England’s Chief Economist warned interest rates should not be cut too rapidly or too far.
Huw Pill signalled that rates should be cut in a ‘gradual’ manner, amid caution over the long-term path of inflation.
The comments come a day after Bank of England Governor Andrew Bailey suggested that ‘more aggressive’ rate cuts could be on the way.
Bailey said that if inflation remains in check the Bank might be able to be ‘more activist’ when it comes to reducing borrowing costs, in an interview with The Guardian.
The pound was quoted at $1.3167 at midday on Friday in London, rising from $1.3110 at the equities close on Thursday.
Matthew Ryan, head of market strategy at Ebury said Pill’s comments appeared to ‘pour cold water over Governor Bailey’s remarks on the possibility of a faster easing cycle’.
‘His communications provide an element of validation to our view that markets perhaps took Bailey’s words too literally, and as a confirmation of faster cuts ahead, rather than merely a warning that this is a possibility.’
Elsewhere, the euro stood at $1.1028, up against $1.1013. Against the yen, the dollar was trading at JP¥146.49, down compared to JP¥146.72.
Housebuilding share prices were a warm order as a survey showed the UK construction sector saw its fastest rate of growth in over two years in September.
The S&P Global UK construction PMI jumped to 57.2 points in September from 53.6 in August - a 29-month high - and well above market consensus of 53.1, as cited by FXStreet.
The faster rates of expansion were seen in all three subsectors, civil engineering, commercial building and housebuilding.
‘Survey respondents cited rising sales enquires since the general election, as well as lower borrowing costs and the potential for stronger house building demand as factors supporting business activity expectations in September,’ Tim Moore, economics director at S&P Global Market Intelligence.
Elliott Jordan-Doak at Pantheon Macroeconomics said the forward-looking parts of the PMI ‘suggest that the strong growth will continue’.
He noted the new orders index jumped to 57.4 from 55.3 in August, a 30-month high, while encouragingly, firms responded to higher demand by hiring additional workers.
On the FTSE 100, Persimmon rose 1.9%, Vistry climbed 1.2% and Taylor Wimpey gained 1.1%. On the FTSE 250, Crest Nicholson was the best performer, firming 4.0%.
The oil price rose again following further military developments in the Middle East.
Brent oil was quoted at $78.45 a barrel at midday in London on Friday, up from $76.56 late Thursday.
As Israel continues to carry out air and ground attacks in Lebanon targeting Hezbollah, Iran, which arms and funds the militant group, said it would step up its response in the event of a retaliation.
Iran’s supreme leader Ayatollah Ali Khamenei vowed that his allies around the region would keep fighting Israel, as he defended his country’s missile strike on his country’s arch-foe earlier this week.
Oil majors BP and Shell continued to tick higher, rising 1.0% and 0.3% respectively. Both are due to release third-quarter trading updates next week.
Leading the blue-chip fallers is JD Sports Fashion, down 3.1%, extending Thursday’s falls after mixed earnings.
Also lower, Phoenix Group, down 1.9%, as UBS downgraded to ’neutral’ from ’buy’ and slashed its price target to 530 pence from 610p.
The broker sees ‘elevated risks to solvency ’, which ‘increases the potential risk of a dividend cut under a recessionary/credit scenario.’
Pub chain JD Wetherspoon edged higher, up 0.2%, after posting annual results.
The firm said sales continued to improve despite having fewer pubs than before the pandemic, as annual adjusted pretax profit surged.
The Watford, Hertfordshire-based company said pretax profit fell 33% to £60.6 million in the financial year ended July 28 from £90.5 million a year ago.
However, its adjusted pretax profit jumped 74% to £73.9 million from £42.6 million.
Revenue rose 5.7% to £2.04 billion from £1.93 billion a year ago.
Panmure Liberum said profit was 3% ahead of its expectations.
Gold was quoted at $2,659.79 an ounce, up against $2,651.03.
Still to come on Friday’s economic calendar, US nonfarm payrolls at 1330 BST.
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